3.1. Net Zero Definition
Most of the assessed companies have a net zero (69) or carbon neutrality (21) pledge, while 17 have a reduction target and 8 no target at all, which is shown in Fig. 3, for each sector. The sectors with the highest share of net zero pledges are the energy and utility sector (9/10), while the sector with lowest share is the real estate sector, where only one of the assessed companies (Prologis) has a net zero goal. In between these extremes are consumer staples (8/10), healthcare (7/10) and materials (11/15), information technology and communication (both 6/10), consumer discretionary (5/10), finance (4/10) and industrials (3/10).
Out of the 115 assessed companies, 55 mention residual emissions or an associated synonym, 46 of them made a net zero pledge, and the remaining nine have a carbon neutrality target. Referring to residual emissions is most common in the materials sector and least common in the real estate sector. As is evident in Fig. 3, companies from all eleven sectors mention residual emissions, not just those mentioned in the literature as hard-to-abate (heavy industry, buildings, agriculture, aviation, shipping and mining). The specific residual emission levels and the reasons provided for them are more thoroughly assessed in section 3.2.
The commitment to balance emissions exclusively with removals is less common compared with simply mentioning residual emissions. Of the 115 companies, 23 pledge to balance emissions exclusively with removals. Of these 23 companies, 18 have a net zero goal, while the remaining five commit to carbon neutrality. There is no clear pattern across the different sectors. One company (NextEra Energy (2022)) aims to reduce emissions to zero without any removals. None of the sectors’ commitment to removals exceeds 50% of companies. In the industrials and energy sectors, no company aims to balance with removals alone. The most ambiguous case in the energy sector was Equinor (2022). It mentions the Oxford Offsetting Principles (Allen et al., 2020), and thus commits to phase out reduction offsets with removal offsets in the long run. However, since it does not state that it will balance remaining emissions with removals in its energy transition plan, it does not count as committing to removals only.
Figure 4 classifies the net zero and carbon neutrality pledges of the various companies according to their compliance to reduce to a residual level before they balance with removals.
Overall, 19 companies mention residual emissions and commit to removals. Of those, 4 have a carbon neutrality target and 15 have a net zero target. These companies are in the upper right corners of the two graphs in Fig. 4. Therefore, the removal target is more strongly connected to net zero with 27.5% of pledges than to carbon neutrality with only 23.8%.
The same is true for mentioning reduction to residual emissions: 42.9% of the companies that aim for carbon neutrality mention reduction to a residual level, while this is true for 66.7% of the companies that have a net zero target. This finding is in line with the fact that carbon neutrality is not clearly associated with emission reductions to a residual level. The ISO standard 14068 on carbon neutrality is not published yet and existing standards on carbon neutrality are not as consistent in demanding reduction to a residual level compared with the definitions of net zero (dena, 2022; Helppi et al., 2023). Furthermore, carbon neutrality is not associated with an obligatory balancing of emissions with removal credits.
The findings highlight that only 21.7% of the companies that have a net zero pledge followed the net zero definition as laid out in the corporate net zero standards. Most of these companies stem from consumer staples (4), followed by information technology, healthcare, communication and utilities (all 2). Real estate, materials and consumer discretionary have 1 company each. The companies can be identified on the left side of Fig. 4 in the upper right corner. Only 8 of these companies provide a residual emission level, which will be explored in greater depth in section 3.2.
The quantitative and qualitative specification of residual emissions, as well as whether they also include scope 3 emissions, is analysed in the following section.
3.2. Comprehensiveness
In the previous section, I showed that most companies have net zero or carbon neutrality pledges, but do not necessarily commit to reducing their emissions as far as possible and then balancing the rest with removals. In what follows, I will focus on the comprehensiveness by presenting the proposed residual emission levels along with the reasons for them. The section closes with an assessment of whether companies include absolute scope 3 emissions into their pledge.
Of the 115 companies, 28 provide a residual emission level. Of those, 23 have a net zero target and 5 have a carbon neutrality target. The residual emission levels of the different companies are visualised in Fig. 5. The median of the levels is 10% and the mean is 19.6%. The median level of 10% is equal to the residual emission level provided by the SBTi in its crosssector pathway (2021).
Of the 15 companies with a net zero definition in line with net zero standards, 8 provide a residual emission level. All of these companies have a residual emission level that is under 10%, except from Microsoft. Rio Tinto, Ultratech Cement, and TotalEnergies, which either produce cement or extract metals, mineral resources or fossil fuels, claim significant residual emission levels. However, IT corporations, including Microsoft, Tencent, and Alphabet, also report having higher residual emissions than the average. The financial and industrial companies lack a quantitative specification of their residual emissions.
The reported levels of some companies need to be interpreted with care. There are three main aspects that influence the ambition of the residual emission level: i) whether the residual emission level refers to a product or to the whole company, ii) whether the residual emission level refers to all scopes and iii) what kind of activities are counted as emission reduction.
Company or Product
Toyota’s and Holcim’s residual emission level refers only to their product and not the company as a whole. For Holcim, this applies only to Scopes 1 and 2, because it has an absolute scope 3 target but a relative target for scopes 1 and 2. In absolute terms, the residual volume of both companies in absolute terms may be higher or lower depending on the development of sales.
Scopes
Meta Platform’s residual emission level applies to scopes 1 and 2. Meta’s scope 3 target is to not have an increase in emissions in its target year. Its scope 3 emissions represent 99% of its total emissions (Meta Platforms, 2023). Therefore the residual emissions in the target year are 99%, as this is the emission level across all three scopes that they have committed to reach in their target year 2030 compared with today’s emissions. They have not published further emission reduction targets after 2030.
Emission removal, captured emission or reduction
The cement companies consider carbon capture and storage (CCS) as reduction. The residual emissions of Holcim are 5% for scopes 1 and 2 and 10% for scope 3. However, in the pathway they provided to achieve net zero for scopes 1 and 2, it is evident that the residual emissions reach 51% if CCS is not counted as an emissions reduction (Holcim, 2023). Neither a pathway nor a CCS rate is provided for Scope 3. The interpretation of CCS as form of emission reduction is in line with the sector specific pathway for cement derived from the sciencebased targets, which specifies that “All decarbonization levers that lead to an emissions reduction in scope 1, 2 and/or 3 according to the SBTi Criteria and GHG Protocol accounting rules are valid. These may include “traditional” levers such as energy efficiency, fuel switching, reduction in clinker content, as well as breakthrough technologies such as carbon capture and permanent geological storage (CCS), bioenergy with carbon capture and storage (BECCS), electrification or novel binders.” (Science Based Target initiative, 2022). The ISO net zero standard defines reductions simply as a decrease of greenhouse gas emissions that are released to the atmosphere (International Organization for Standardization [ISO], 2022). Therefore, emissions that are captured from the air after release, as happens with BECCS, are defined as removal by ISO and do not count as an emission reduction. CCS from an industrial process could fall under the definition of emission reduction. This depends on the definition of the atmosphere, as carbon dioxide will be present and stored in a gaseous state. Furthermore, ISO states that “For GHG emissions that occur not directly into the atmosphere but into a body of water or into soil, the relevant emission is the amount by which the concentration of the gas increases in the atmosphere as a result of this emission, according to scientific evidence for chemical and biological processes that can occur in water or soil.” Therefore, the accounting of CCS as emission reduction depends on the long term separation of CO2 and on the considered time dimension[1]. Philip Morris also accounts carbon insetting (review Table 1 for the definition of terms) and land-based carbon removal as emission reductions. If they did not include insetting as an emission reduction, the residual emissions for Philip Morris would be 20%. The 35 companies that did not provide residual emission levels but did mention that they have residual emissions in their operations or value chain use offsets and removals as a hedge and do not commit to any minimum reduction level in their target year.
Having just focused on the quantitative specification of residual emissions, I now turn to the reasons provided for residual emission levels. The reasons given by the different companies, grouped by sectors, are listed in Table 2.
Table 2
Overview of companies that define residual emissions or link them to a certain process
Sector
|
Reasons for residual emissions, including specific processes
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Energy
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TotalEnergies (2023) cites oil production for polymer production in the petrochemical industry as a source of residual emissions;
|
Materials
|
BHP (2022) lists “limited or no current technological solutions” and “access to renewable energy is constrained” as sources of residual emissions;
Vale (2021) names shipping and steel as hard-to-abate sectors;
RioTinto (2022) refers to “high temperature” and “processes producing metals and minerals”;
Glencore (2022) says it will only offset after “prioritizing emission reductions”;
Grupo México (2022) states simply that some emissions “cannot be reduced”;
Holcim (2023) and UltraTech Cement (2022) classify themselves as hard-to abate and mention emissions during cement clinker production;
|
Industrials
|
None
|
Consumer discretionary
|
Amazon (2022) mentions residual emissions in buildings;
Alibaba (2021) refers to residual emissions in relation to energy use in Asia where access to renewable energy is limited and use of natural gas in offices and retail stores is common;
|
Consumer staples
|
Procter & Gamble (2021) states that some emissions "cannot be eliminated";
Philip Morris (2021) defines residual emissions as “unavoidable, i.e., technically or economically not further abatable”;
Unilever (2021) aims to reduce “as far as possible”;
|
Healthcare
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UnitedHealth (2022) aims to “reducing these emissions to as close to zero as possible”;
Eli lilly (n.d.) characterises the emissions as those that "cannot be eliminated";
|
Finance
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JP Morgan Chase (2022) cites embedded emissions in buildings;
HSBC (n.d.) says emissions “cannot be reduced or replaced”;
|
Information Technology
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Meta Platforms (2023) refers to “residual emissions we are unable to reduce by 2030”;
|
Communication
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Walt Disney (2022) alludes to emissions “where technological solutions are not available, accessible, and affordable”;
According to Comcast (2022), Verizon (2022) and AT&T (2023), some emissions cannot be eliminated;
|
Utilities
|
Southern Company (2020) points to residual emissions from natural gas;
Enel (2023) specifies residual emissions from scope 3 emissions that cannot be avoided;
National Grid (2022) also notes residual emissions from scope 3 emissions and air travel;
Dominion Energy (2022) will reduce ‘’as much as technology and customer affordability allow”;
Engie (2023) refers to residual emissions that are “the most difficult to abate”.
|
Real Estate
|
none
|
Only 27 companies provided a qualitative specification of their residual emissions. Of these, 13 refer to a general infeasibility and four of them claim additionally that they belong to hard-to-abate sectors. Just three companies invoked economic or affordability constraints for themselves or for consumers (Walt Disney, Philip Morris, and Dominion Energy). Amazon and JPMorgan Chase relate their residual emissions to embedded emissions in buildings. TotalEnergies, Rio Tinto, Dominion Energy and the Southern Company consider the emissions from fossil energy carriers to be residual. Limited access to renewable energy is a reason for unavoidable emissions according to Alibaba and BHP. Only UltraTech Cement, Holcim, Vale and Rio Tinto mention process related obstacles for emission reductions. None of the companies that have agriculture in their supply chain (Walmart, McDonalds, all alcoholic and non-alcoholic beverage manufacturers, Nutrien and Wesfarmers) reported on process-related residual emission levels in agriculture. The feasibility of emission reductions in agriculture, especially in relation to livestock, is not elaborated on in the net zero reports, which leaves the residual emission level for agricultural products underexplored in this study. Only 9 companies linked their residual emissions to a specific process or product.
The sectors that frequently mention residual emissions, but provide no detailed reasons for them aside from a general infeasibility are healthcare, finance and information technology. There is a discrepancy between the significant amount of residual emissions reported and the lack of any explanation for them, particularly in the IT sector. Although additional emission reductions may be achievable, there is a possibility that some companies in the healthcare sector just use the 10% residual emissions figure as suggested by the SBTI, as they do not provide a source for the remaining emissions. The lowest residual emission level reported came from Enel at just 1%, and the reason provided was upstream scope 3 emissions. This was also the only source provided by the National Grid that mentions air travel.
In what follows, I discuss the coverage of absolute scope 3 emissions. Overall, 26 companies included absolute scope 3 targets that related to net zero or carbon neutrality pledges, which is shown by sector in Fig. 3. Most companies have a net zero target but only Alibaba, UPS and Apple cover scope 3 emissions and have a carbon neutrality goal. One of the 26 companies does not commit to absolute scope 3 reductions (Meta) but commits only to prevent its scope 3 emissions from growing further in its target year. There is a clear pattern across sectors: companies that are active in oil and gas did not account for absolute scope 3 emissions. The only company that claims to provide CCS for scope 3 emissions in oil and gas is TotalEnergies. However, based on the description in their report, it is unclear who should be held responsible for paying for the CCS, TotalEnergies or its clients. None of the corporations in the consumer discretionary sector specifically link their complete scope 3 emissions to their ultimate net zero goal. With the exceptions of Sony and Deutsche Telekom, the goals for communication technology companies are comparable in their omission of scope 3 emissions. While 4 consumer staples firms include scope 3 emissions in their net zero goals, only Philip Morris specifies its residual emission levels for this absolute aim, and the others might only attain their aim through a significant amount of removals. Holcim has an absolute scope 3 goal, but only a relative goal for scopes 1 and 2. Therefore, none of the cement companies account for absolute emissions across all three scopes. The only company in the assessed sample that ticks every box i.e., it uses the term net zero according to its definition in corporate net zero standards, has an absolute emission reduction target for all three scopes and specifies were its residual emissions come from is Enel. However, Enel’s climate goal has also been criticised, as Enel sells its coal power plants, rather than closing them down, meaning there might not be any actual emission reduction, but just a change in control over the carbon intensive infrastructure (Day et al., 2023b).
All information regarding the pledges, analysed documents and quotes that led to a decision in relation to a criterion are provided in the supplementary file.